Tracks hide concession income, study claims

August 18, 2004|By Greg Garland | Greg Garland,SUN STAFF

A study released yesterday claims that the owners of Pimlico Race Course and Laurel Park have failed to disclose to state regulators millions of dollars in income each year from food and beverage sales and hospitality events at the thoroughbred racetracks.

The report by the Maryland Tax Education Foundation, a conservative tax policy group led by Chevy Chase investment banker Jeffery C. Hooke, questioned the need for slot machine gambling or state subsidies at the tracks.

But track executives dismissed the group's analysis, saying it was based on faulty assumptions about how their business operates. "It's totally, absolutely inaccurate," said Timothy Capps, executive vice president of the Maryland Jockey Club, minority owner of the tracks.

Hooke's group estimated that the two tracks would have posted a combined profit of $4.9 million in 2003 - rather than a $3.3 million loss - if owners had fully reported profits from concession sales and properly accounted for other transactions.

"The need for public scrutiny seems especially appropriate at this time when the tracks are asking the state to make them the sole Maryland provider of extremely lucrative large-scale slot machine gaming and when the tracks continue to lobby for state subsidies," he said.

The tax policy group called for the Maryland Racing Commission to launch an independent review of the tracks' audited financial statements.

Hooke's group said that the tracks reported 1.6 million visitors in 2003 but audited financial statements showed a combined profit of only $167,000 from the sale of food and drinks and hospitality events.

He said firms that manage concessions at other racetracks report each visitor spends $5 to $10 per day.

Hooke said that would translate into at least $9 million in revenue based on the number of visitors to Maryland tracks - yielding an estimated $5 million in pre-tax profits.

Capps said the Maryland Jockey Club's audited financial statements accurately show all income from concession sales. "We may generate $5 per head in revenue, but that's not our net income," he said.

Capps said that the tracks have become "far more inefficient" in recent years as they extended hours and days of operations. He said that means smaller crowds arriving at disparate times who generally buy only beverages and light food. As a result, he said, profits are marginal.

Hooke's group has issued previous reports saying the state could make far more money by auctioning lucrative slots licenses to the highest bidder instead of giving them to a small group of racetrack owners.

He also has challenged assertions that allowing slots at sites other than racetracks would damage Maryland's ailing horse racing industry.